Maiden Lane LLC: Untangling AIG

...Oh we're nowhere near understanding how screwed up AIG is, but TPM has a fascinating post about how the Fed is dodging regulations to funnel cash to failing companies like AIG.

According to TPM's source, the Fed (which is prohibited from buying assets) is creating bogus corporations who then invest in dying companies. Here's the deal they did for Bear Stearns, using a shell company called Maiden Lane LLC (named after the address of the Manhattan Fed):

The deal then was JP Morgan put $1 billion into Maiden Lane, the Fed put $29 billion in cash into it. Maiden Lane paid Bear Stearns $30 billion, which went straight back to JP Morgan as this deal happened simultaneously to JP's purchase of Bear. So Morgan got $30 billion in cash ($29 billion net) and the Fed got stuck owning the crap, but was legally only making a loan to Maiden Lane, who was the legal owner (Maiden Lane was incorporated not in NYC, but in Delaware to avoid paying taxes).

The law is avoided - but essentially the Fed is giving money to JP Morgan so they can buy Bear.

Hooray for the rule of law.